How IR can reap the benefits of social without provoking regulators

On April 2nd 2013, public companies under the purview of the Securities and Exchange Commission were allowed for the first time to disclose material information via social media networks provided that a company that chooses to do so informs investors ahead of time. Along with this regulatory change financial professionals of all stripes are becoming increasingly more interested in the information that public companies release online, and to what is being said by other professionals in the market. A smart move considering that the risks of falling behind as social media makes further inroads into the realms of Corporate Communication and Investor Relations are something most professionals can't afford.

BNY Mellon has found that the number of public corporations around the globe using social media to communicate with investors has risen over the past three years. The study shows an increase from 9% to 26%, with penetration highest in North America at 32%.

Although adoption figures continue to rise, many public companies are hesitant to jump on the bandwagon. Such hesitation is well founded - any new, unconventional communication outlet brings with it certain risks. IR professionals in particular are recognizing that communication with shareholders through such a powerful medium requires careful consideration.

A core concern centers on the issue of content control. With the rise of online communication, there appears to be an abundance of stories of public companies experiencing close calls with regulators after haphazard use of social media. Consider the Facebook post by Netflix CEO Reed Hastings that led to investigation by the SEC. In July of last year Hastings posted on his Facebook page that for the first time in the company's history, viewers had consumed 1 billion hours in a month. Posts like these are what is blocking the Ontario Securities Commission and similar regulating bodies from amending their disclosure requirements. They fear that by dispersing financial information through social media, public companies are creating an uneven playing ground where information isn't universally accessible to all shareholders.

Content control isn't only essential to maintaining a good relationship with regulating bodies, it can be what lies between good PR and a serious reputation killer. There obviously wasn't a member of the PR department monitoring Chrysler's twitter account when an employee posted this to its nearly 8,000 followers:

Regardless of the hesitation and potential risks involved, it is clear that financial firms, public companies, and investors are adapting to this new method of communication and many are realizing its tremendous benefits.

According to Robert Williams, the Vice President of IR at Dell Inc.: "The value of social media in IR is extending your reach to shareholders in a way that is more conversational than traditional press releases and presentations. By developing a social strategy in IR, you are taking a proactive approach and becoming part of (and helping to form) the conversation about your company." (source: Q4 Blog-"Sifting through the noise: IROs weigh in on SEC release for using social")

This wave of innovation is powerful and largely unstoppable over the long term. It is up to individual finance professionals to either ride it or get buried by it. If you do plan to jump on and get started, here are a few tips from the team at Finmaven that may help you navigate around any danger and make sure you come up with your head above water:

1. Create an approver/gatekeeper to ensure that all communication is vetted before it goes public

2. Know who is talking about you and their influence online so that you can connect with them directly

3. Assess your needs and implement tools that help streamline your social media tasks in order to decrease the workload for your PR/IR department

Mikayla Ford,

Finmaven